Resolution 055/2008

BOARD RESOLUTION NO. 055/2008
SUBJECT: ECONOMIC POLICY ADVISORY – MODIFIES THE REGULATIONS OF THE HOUSING DEVELOPMENT UNIT.

HAVING SEEN:
Supreme Decree No. 26390 of November 8, 2001.
The Report from the Economic Policy Advisory APEC-INEP No. 016/2008 of April 25, 2008.
The Report from the Legal Affairs Management SANO No. 107/2008 of April 25, 2008.

CONSIDERING:
That through Supreme Decree No. 26390, the creation of the Housing Development Unit (UFV) with a value maintenance clause to an index to be established by the Central Bank of Bolivia (BCB) based on the Consumer Price Index (CPI) calculated and published by the National Institute of Statistics is mandated.

That Report APEC-INEP No. 016/2008 recommends modifying the monthly calculation date of the Housing Development Unit (UFV) due to the change in base for the CPI calculation that will be published starting from the month of May 2008.

That Report SANO No. 107/2008 states that there is no legal impediment for the BCB Board of Directors to consider the approval of the modification of the Regulations of the Housing Development Unit (UFV).

THEREFORE,
THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Modify Article 7 of the Regulations of the Housing Development Unit (UFV) as follows:

SAYS:
Article 7.- (Calculation Methodology) For the calculation of the UFV, the UFV of the previous day multiplied by an update factor will be used, whose calculation will be carried out as follows:

The update factor, to calculate the UFV corresponding to the first six days of each month, is defined as the "n" root of one plus the annualized twelve-month inflation corresponding to two months prior. Where "n" is the number of calendar days in the month for which the UFV is being calculated.

The update factor, for the calculation of the UFV from the seventh day of each month, is defined as the "n" root of one plus the annualized twelve-month inflation corresponding to the immediate prior month. Where "n" is the number of calendar days in the month for which the UFV is being calculated.

The detailed calculation methodology is contained in the Appendix of these Regulations.

SHOULD SAY:
“Article 7.- (Calculation Methodology) For the calculation of the UFV, the UFV of the previous day multiplied by an update factor will be used, whose calculation will be carried out as follows:

The update factor, to calculate the UFV corresponding to the first ten days of each month, is defined as the "n" root of one plus the annualized twelve-month inflation corresponding to two months prior. Where "n" is the number of calendar days in the month for which the UFV is being calculated.

The update factor, for the calculation of the UFV from the eleventh day of each month, is defined as the "n" root of one plus the annualized twelve-month inflation corresponding to the immediate prior month. Where "n" is the number of calendar days in the month for which the UFV is being calculated.

The detailed calculation methodology is contained in the Appendix of these Regulations.”

Article 2.- Approve the new UFV calculation Appendix that forms part of this Resolution.

Article 3.- That for the days 7, 8, 9, and 10 of the month of May 2008, the calculation of the UFV will be carried out using the same calculation factor employed in the period from May 1 to May 6, 2008.

Article 4.- This Resolution will enter into force as of May 2, 2008.

Article 5.- The Presidency and General Management are charged with the execution and compliance of this Resolution.

La Paz, April 29, 2008

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Raúl Garrón Claure

_________________________ _________________________ Gustavo Blacutt Alcalá Hugo Dorado Araníbar

_________________________ _________________________ Rolando Marín Ibáñez Ernesto Yáñez Aguilar

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Osvaldo Nina Baltazar

APPENDIX
CALCULATION METHODOLOGY OF THE HOUSING DEVELOPMENT UNIT (UFV)

The methodology for the calculation of the UFV is as follows:

• With the data of the monthly CPI published by the INE, the twelve-month inflation is calculated:
π_t^12 = (IPC_t / IPC_{t-12}) - 1 where π_t^12 is the twelve-month inflation corresponding to month t.

• Based on the twelve-month inflation, the annualized twelve-month inflation is obtained:
mπ_t = (1 + π_t^12)^(1/12) - 1 where mπ_t is the annualized twelve-month inflation corresponding to month t.

• From the first to the tenth day of each month, the calculation of the UFV for a day “d” (UFVd) will use the data from the previous day (UFVd-1) multiplied by the “n” root of one plus the annualized twelve-month inflation from two months prior (mπ_{t-2}). Where “n” is the number of calendar days in the month to which day “d” corresponds (equal to 28, 29, 30, or 31). This is:
UFVd = UFVd-1 * (1 + mπ_{t-2})^(1/n)

• Between the eleventh day and the last day of the month, the calculation of the UFV for a day “d” (UFVd) will use the data from the previous day (UFVd-1) multiplied by the “n” root of one plus the annualized twelve-month inflation from the immediate prior month (mπ_{t-1}). Where “n” is the number of calendar days in the month to which day “d” corresponds (equal to 28, 29, 30, or 31). This is:
UFVd = UFVd-1 * (1 + mπ_{t-1})^(1/n)

• The value of the UFV of the base day will be equal to 1.